Establish Trust (Family Trust) and Trust Company (Trustee) in Hong Kong

Since 2013, Hong Kong has been following a new modern trust law due to the Trust Law (Amendment) Bill under Trustee Ordinance. Hong Kong offers a combination of advantages for those who set up trust here also has become one of the most attractive positions as an attractive Asian Trust jurisdiction. In Hong Kong, English and Chinese are considered as the Business and Legal Language. 

Hong Kong is a substantial financial center in Asia, and it also serves as a business hub and a gateway to China. Therefore, one can easily communicate with each other without any legal system problem. That’s why people want to set up their trust in the freest economy of the world. 

What is the Difference Between Trust and Trustee?

Trust is a kind of relation in which a trustee (a company or an individual) carries business in order to provide benefits to other people (the beneficiary). A trust may be discretionary, which is where trustees can decide about the amount that would be distributed among the beneficiaries. On the other hand, the trust can also have some sort of fixed interests, meaning that it will only provide benefit to those who are in predetermined proportions. 

This article will explore how family trust works and as well as a corporate trustee.

Trust

What is Family Trust?

In Hong Kong, there is a heyday of setting up a family trust in order to enjoy the maximum benefits associated with it, especially taxes.  Now, families have been building their business as trusts just to preserve and manage their wealth so that their heirs can relish the benefits for centuries. 

To be more precise, a trust is an arrangement whereby assets or property are transferred from one person(the settlor) to another person (the trustee) to hold the property for the benefit of a specified list or class of persons (the ‘beneficiaries’).

Why I need Family Trust?

The next question people tend to ask is why they need to set up a family trust in Hong Kong. There are plenty of benefits for Hong Kong family trust formations, but the practical one is to understand the difference between the formal owner of the property, the trustee, and those that wish to use or benefit from the property, the beneficiaries. Unlike corporate vehicles, the lack of rigid, formal requirements for the creation and operation of trusts, and the tremendous flexibility of trust instruments make them uniquely useful for estate and succession planning beneficiaries . 

There is tremendous flexibility of trust instruments, make them uniquely useful for estate and succession planning.

They offer some excellent benefits, especially for the 

• Individuals who are changing, or planning to change, their domicile residence or citizenship. 
• Families residing abroad who wish to dispose of their estate on death freely, and those seeking asset protection without recourse to a lengthy and expensive probate proceedings.

What can I do with Family Trust?

As per stated earlier, family trust is s are sometimes used as a method of preserving a  wealth of the business or family business. You can also use the trust fund for estate and succession planning to secure their assets. 

Here are some objectives of a family trust fund- 

• Charitable or philanthropic purposes
• Preserving the family business
• Family wealth management, protection, and consolidation
• Providing for underage beneficiaries and the surviving spouse
• Succession planning
• Avoiding probate.

Trust Company

What is Trust Company?

A trust company is a legal entity that plays a role of an agent, fiduciary, or trustee on behalf of a business or an individual for management, administration, and the eventual transfer of assets to a beneficial party. 

Who can set up Trust Company in Hong Kong?

It is really necessary to know about the requirement of setting up a trusted company in Hong Kong so that you could avoid problems. 

And if you are applying for registering a trusted company in Hong Kong, then you  should fulfill the following requirements:

• When the issued share capital of the company is not less than HK$3,000,000;
• The board of directors has been duly appointed;
• In the Articles of Association, the company’s objects must be restricted to some or all of the objects set out in section 81 of the Trustee Ordinance;
• The company must have :
  • Under section 2 of the Banking Ordinance (Cap. 155), a sum of money which is not less than HK$1,500,000 shall be deposited in the name of the Director of Accounting Services (“DAS”) (i.e. “Director of Accounting Services for the account of (name of the intended trust company)”) with an authorized institution and lodgeda receipt issued by the authorized institution for that amount with the DAS; or
  • As per section 2 of the Banking Ordinance, in the name of DAS, the money is deposited with a finance company which is a subsidiary of a bank should not be less than HK$1,500,000. Moreover, a receipt should be issued by the finance company for that amount with the DAS; or
  • Under section 2 of the Banking Ordinance, from a bank, the amount of sum which is deposited with the DAS as a guarantee, should be acceptable to the DAS. 
• Despective of the money deposited with the DAS (a director’s written confirmation is required), the respective organization need to meet the obligations, expect from the liability to its shareholders. 

What are the preparations for setting up a Trust Company?

In order to set up a trusted company in Hong Kong, applicants need to file a written application accumulated with the following documents and fees can be delivered by post or in person to the Companies Registry :

• Written confirmation of director’s of your company.
• An application fee of HK$11,250; and
• For the issue of the registration certificate, you need to pay a fee of HK$840. And if somehow, your application gets rejected, you might receive a refund of the HK$840.

Note: Startupr’s services fee is not included. Please contact us for more details.

Last Words!

Now we firmly believe that you have a better idea about the family trust and trust company, also how you can set up them in Hong Kong. A trust company is incorporated in Hong Kong and registered under the Companies Ordinance and Trustee Ordinance. If you are looking for some help, then Startupr can help you in Hong Kong trust formation.